Short Answer TypeWhat is the relation between Average Variable Cost and Average Total Cost, if Total Fixed Cost is zero?
A firm is able to sell any quantity of a good at a given price. The firm's marginal revenue will be:
(Choose the correct alternative):
(a) Greater than Average Revenue
(b) Less than Average Revenue
(c) Equal to Average Revenue
(d) Zero
Differentiated products is a characteristic of: (Choose the correct alternative):
(a) Monopolistic competition only
(b) Oligopoly only
(c) Both monopolistic competition and oligopoly
(d) Monopoly
Demand curve of a firm is perfectly elastic under:(Choose the correct alternative)
(a) Perfect competition
(b) Monopoly
(c) Monopolistic competition
(d) Oligopoly
A consumer consumes only two goods X and Y. Marginal utilities of X and Y is 3 and 4 respectively. Prices of X and Y are Rs 4 per unit each. Is consumer in equilibrium? What will be further reaction of the consumer? Give reasons.
What will be the effect of 10 percent rise in price of a good on its demand if price elasticity of demand is (a) Zero, (b)-1, (c)-2.
What is minimum price ceiling? Explain its implications.
Minimum price ceiling means the least price that could be paid for a good or service. It is the price fixed by the government for a good in the market. The government fixes the price on agricultural products and food grains in particular so that the farmers get their fair price of a commodity which otherwise actually can be sold with too low of a price.
Effects of price floor:
(i) Minimum Return: Farmers are ensured with the minimum returns as their products are completely sold in the market at comparatively higher price. This leads to an increase in their level of income.
(ii) Maximum Level of output: The government ensures to buy the full produce of the farmers which are not sold in the market at the price floor. Hence, they are able to produce the maximum level of output.
(iii) Burden on Government: It also puts extra burden on the government revenues. It becomes mandatory for the government to purchase the excess produce, even if it runs a sufficient volume of buffer stocks.
(iv) Higher Taxes: The government also tries to shift the burden (associated with purchasing the excess produce at higher price) to the consumers and the traders in form of higher taxes.
If the prevailing market price is above the equilibrium price, explain its chain of effects.
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